Although stem cell-based therapies can potentially be used to treat numerous prevalent diseases, their successful clinical translation requires overcoming the major roadblock of immune rejection. In addition, in autoimmune diseases such as Type 1 diabetes (T1D), where a breakdown in immune tolerance leads to the immune-mediated destruction of pancreatic insulin-producing cells, the underlying autoimmunity needs to be altered to allow successful engraftment without immunosuppression. Developing approaches to manipulate immune tolerance in the context of autoimmunity is thus essential for improving methods to cure and treat human autoimmune diseases. Within the immune system, the thymus plays a critical role in establishing central immune tolerance through the education of developing T cells. The thymus enforces tolerance through the deletion of T cells that recognize self-antigens and the production of potent regulatory T cells (Tregs) that can suppress immune responses. Given that self-identity is encoded by thymic epithelial cells (TECs), an appealing approach to manipulating immune tolerance in the context of stem cell therapies would be to reprogram the immune system through the generation of stem cell-derived TECs. Recently, our group has developed a novel method to differentiate human pluripotent stem cells (hPSCs) into thymic epithelial progenitors (TEPs) that mature into functional thymic tissue upon transplantation into immunodeficient mice. Importantly, these hPSC-derived TEPs acquire characteristics of mature TECs that allow generation of functional T cells capable of mounting allogeneic immune responses as well as formation of Tregs that maintain immune tolerance through crucial inhibition of self-reactive T cells. This unique and highly innovative tool will now be used to establish novel humanized murine models that more closely mimic in vivo human immune responses. Humanized mice transplanted with hPSC-derived TEPs will be used to study engraftment of another stem cell derivative (pancreatic beta cells). Additionally, a model of T1D autoimmunity will be developed through the generation of islet-specific autoreactive T cells within the thymus. Indeed, by altering expression of antigens such as insulin in hPSC-derived TEPs, we will have an opportunity to modify the immune repertoire as well as potentially impact the development of Tregs specific to islets. This will allw us to examine the early stages of T1D in an animal model using human immune cells and targets. Finally, these humanized mouse models will be used to study the impact of manipulation of thymic function and Treg administration that have the potential to alter allogeneic and autoimmune responses to stem cell-derived grafts. Taken together, our proposed studies will provide unique tools to enable improved studies of stem cell derivatives transplantation and modeling of autoimmune disorders such as T1D. Furthermore, our work will lay the foundation for the potential that thymic immune tolerance can be manipulated to improve engraftment of stem cell derivatives in the context of autoimmunity.